Key Takeaways
- Afterpay generated close to NZ $20 million in late‑fee income in New Zealand during 2023‑2024, despite advertising an interest‑free service.
- The late‑fee schedule charges a one‑time fee of up to 25 % of the order value for purchases under $40, and a $10 fee (plus a $7 fee after seven days) for larger orders, capped at the lower of 25 % of the borrowed amount or $68.
- Reported late‑fee earnings rose from NZ $18.5 million in the year to December 2023 to NZ $19.7 million in the year to December 2024.
- Since September 2024, buy‑now‑pay‑later (BNPL) providers have been brought under the Credit Contracts and Consumer Finance Act (CCCFA), but specific exemptions remove requirements that late fees reflect actual costs and prohibit multiple simultaneous fees.
- Consumer NZ argues that these exemptions weaken consumer protection, leaving structural gaps that fail to curb unaffordable lending or reduce financial hardship.
- FinCap highlights that late fees on essentials such as petrol or food can trap households in a debt “treadmill,” exacerbating cost‑of‑living pressures.
- Both organisations recommend earlier engagement with lenders or free helplines, licensing of debt‑collection practices, and swift regulatory revisions once the current Financial Service Reforms pass Parliament.
- The situation underscores the need for balanced oversight that preserves the convenience of BNPL while safeguarding vulnerable consumers from escalating fee‑driven debt.
Afterpay’s Late‑Fee Income in New Zealand
Afterpay’s business model in New Zealand hinges on an interest‑free promise: shoppers incur no extra charge if they meet the instalment schedule. However, the real revenue driver for the firm is the late‑fee structure that kicks in when a payment is missed. According to the company’s own disclosures, Afterpay earned approximately NZ $18.5 million from late fees in the fiscal year ending December 2023, a figure that climbed to NZ $19.7 million for the year ending December 2024. This near‑$20 million stream demonstrates that, although the service markets itself as cost‑free, a substantial share of its income derives from penalties imposed on consumers who fall behind on payments. The growth in late‑fee revenue suggests either an increase in missed payments, a rise in transaction volume, or both, prompting scrutiny from consumer advocates and regulators alike.
Fee Structure for Missed Payments
The late‑fee mechanics are tiered. For any purchase valued at NZ $40 or less, a single missed instalment triggers a one‑time fee of up to 25 % of the total order amount. For orders exceeding NZ $40, the penalty begins with a flat NZ $10 charge when a payment is overdue. If the amount remains unpaid after seven days, an additional NZ $7 fee is applied. This process can repeat, but the cumulative late fees are capped at the lesser of 25 % of the amount originally borrowed or NZ $68. Consequently, a consumer who misses payments on a modest‑sized purchase could see fees that represent a significant proportion of the original cost, while larger purchases are limited by the ceiling, yet still capable of imposing a notable financial burden. The design allows Afterpay to collect revenue quickly from delinquent accounts while limiting exposure to excessive liability on any single transaction.
Reported Late‑Fee Earnings
The upward trajectory in late‑fee income—from NZ $18.5 million to NZ $19.7 million—occurred against a backdrop of broader economic pressures, including inflation and rising living costs. Afterpay has not publicly detailed the exact drivers behind the increase, but the trend aligns with reports from credit bureaus showing a slight improvement in overall sector arrears (to 8.8 % in April) after a period of monthly rises. This suggests that while the proportion of accounts falling behind may have stabilised or improved modestly, the absolute value of fees collected grew, likely due to higher transaction values or a larger user base. The company’s reluctance to comment on the figures when approached by media outlets further fuels speculation about the sustainability and ethical implications of relying heavily on penalty revenue.
Regulatory Framework and Recent Amendments
In September 2024, New Zealand brought buy‑now‑pay‑later services under the ambit of the Credit Contracts and Consumer Finance Act (CCCFA), a move intended to extend consumer‑credit protections to a rapidly growing sector. However, the legislation included specific exemptions for BNPL providers: they were released from section 41, which bans unreasonable fees, and from section 44A, which mandates that default fees reflect the actual cost incurred by the lender. As a result, late fees no longer need to be tied to genuine expenses, multiple penalties can be levied simultaneously across different purchases, and the overall fee regime is weaker than that governing traditional credit products such as personal loans or credit cards. These carve‑outs were ostensibly designed to accommodate the unique billing cycles of BNPL, but they have opened the door to fee structures that consumer advocates argue are disproportionately punitive.
Consumer NZ’s Assessment of the Regulatory Exemptions
Consumer NZ’s spokesperson Gemma Rasmussen criticised the exemptions as a substantial rollback of consumer safeguards. She noted that, while the reforms formally integrated BNPL into the consumer‑credit framework and enhanced regulatory oversight, they failed to address the core drivers of harm identified before the changes: over‑commitment and financial hardship. Rasmussen pointed out that hardship cases linked to BNPL continue to rise, and that the use of BNPL for essentials such as groceries, petrol, and even alcohol remains prevalent. Although consumers now receive stronger legal protection in principle, the exemptions create structural gaps that allow lenders to impose fees that do not mirror actual costs, thereby undermining the CCCFA’s objective of preventing unfair or deceptive practices. Rasmussen warned that, combined with ongoing cost‑of‑living pressures, these weaker safeguards could be fuelling the observed increase in late‑fee revenue.
FinCap’s View on Household Financial Strain
FinCap spokesperson Jake Lilley echoed these concerns, emphasising the real‑world impact on households that rely on BNPL for everyday necessities. Lilley described a scenario where a family incurs a late fee on a purchase of petrol or food; because the fee adds to their outstanding balance, they find it even harder to afford the same essentials in the following month, potentially setting off a debt “treadmill” that accelerates over time. Financial mentors working with whānau (families) report that difficulty repaying BNPL lenders is an added source of stress, particularly for those already struggling to make ends meet. Lilley highlighted that early communication with lenders—or prompt contact with free, confidential services such as the MoneyTalks helpline—can markedly improve outcomes, helping consumers avoid debt‑collection actions or the sacrifice of basic needs. He also advocated for licensing debt‑collection agencies and urged regulators to amend the BNPL rules swiftly once the current Financial Service Reforms are enacted, arguing that timely intervention is essential to prevent further entrenchment of harmful borrowing patterns.
Proposed Measures to Mitigate Harm
Both Consumer NZ and FinCap converge on a set of practical recommendations. First, they encourage consumers to proactively inform BNPL providers when they anticipate difficulty meeting an instalment, as many lenders offer flexible repayment plans or temporary relief options. Second, they promote the use of free, confidential budgeting helplines like MoneyTalks, which can connect individuals with financial mentors who help devise sustainable repayment strategies. Third, they call for the regulation of debt‑collection practices specific to BNPL debts, ensuring that collection agencies operate under fair‑conduct standards and do not exacerbate consumer distress. Finally, they urge policymakers to revisit the CCCFA exemptions that allow unreasonable, non‑cost‑reflective fees, arguing that aligning BNPL fee structures with those of other credit products would restore consistency and strengthen consumer protection across the credit market.
Broader Implications for Buy‑Now‑Pay‑Later Services
The Afterpay case illustrates a broader tension inherent in the BNPL model: the promise of interest‑free convenience can mask a revenue mechanism that profits from consumer vulnerability. While the service offers genuine benefits—such as enabling smoother cash flow for shoppers and boosting sales for merchants—the reliance on late‑fee income raises questions about long‑term sustainability and social responsibility. As more jurisdictions examine BNPL through consumer‑protection lenses, New Zealand’s experience may serve as a cautionary tale. Policymakers must balance innovation with oversight, ensuring that the flexibility that makes BNPL attractive does not become a conduit for exploitative fee practices. Without such balance, the sector risks eroding public trust and inviting stricter, potentially disruptive regulation that could curb the very convenience that has driven its rapid growth.
In summary, Afterpay’s NZ $20 million‑plus late‑fee earnings highlight how fee structures, regulatory exemptions, and socioeconomic pressures intertwine to shape consumer outcomes. Addressing the gaps identified by Consumer NZ and FinCap—through clearer fee rules, stronger oversight, and accessible support mechanisms—will be essential to harness the advantages of BNPL while guarding against the debt traps that can arise when fees are detached from actual lender costs.